Unauthorized Items - 24 Hour Rule

Yes and no. Under the Uniform Commercial Code, the bank has until its midnight deadline (the 24 hour rule) to return the checks as unauthorized. Your customer, however, is not subject to that rule. She has a reasonable period after her statement is made available to detect and report alterations and unauthorized items (UCC Section 4-406). The items you describe appear to fit the Reg CC definition of a remotely created check in Section 229.2 (fff). The bank that accepts such an item for deposit makes a special warranty under Section 229.34 (d) that the remotely created check was authorized by the depositor on whose account it is drawn.If you are obliged to refund the amount of the items to your customer, you would have a warranty claim against the depositary bank for up to one year. The depositary bank has a defense against your claim if you had a defense against paying your customer (unreasonable delay in making the claim is one defense). If your customer completes a statement signed under the penalty of perjury that the item was not authorized by her, in the amount of the item and payable to the item's payee, and if you received the item from the Federal Reserve you should review the provisions of Federal Reserve Operating Circular #3 , paragraph 20-10, and the Fed's Quick Reference Check Adjustments Guide. You have up to 60 days from the date of the Fed's cash letter for the item to use that process. If you can't use the Fed's adjustment process, you'll have to pursue your warranty claim directly with the depositary bank.

First published on BankersOnline.com 11/24/08